Praise be to Allaah.
This partnership is known to the scholars as a mudaarabah
partnership (limited or silent partnership), which is where one person gives
his money to another to do business with it, and the profit is shared
between them according to whatever agreement they make. The one who does the
business is called mudaarib.
See al-Mawsoo’ah al-Fiqhiyyah, 8/116
In order for this to be permissible, it is essential that the
division of profits be according to a set share of the profit, such as
one-half, one-third, and so on.
It is not permissible for that share to be a fixed share of
the capital, such as if he took some money to do business with it and they
agreed that he would give him – for example – ten percent of the capital on
the basis that this is profit.
Similarly it is not permissible for the profit to be a set
amount of money – such as one thousand dirhams every year or every month.
Rather it must be a share of the profit, according to whatever they have
If a specific amount of money or a specific percentage of the
capital is stipulated, then the partnership contract is haraam and invalid.
All of this has been agreed upon by the scholars, and there
is no dispute among them concerning that, praise be to Allaah.
Ibn al-Mundhir said: The scholars are unanimously agreed that
an agent may stipulate to the owner of the money that he will get one-third
of the profit, or half, or whatever they agree upon, provided it is a known
percentage (of the profit). End quote from al-Mughni. 7/136
Ibn Qudaamah said in al-Mughni (7/146):
If the share of one of
the partners is set as a specific amount of money, or a sum of money is set
along with his share – such as if he stipulates that he will have a
percentage plus ten dirhams, the partnership becomes invalid. Ibn al-Mundhir
said: All of the scholars from whom I learned are agreed that the mudaarabah
partnership is invalidated if one or both of them stipulate that they will
have a certain amount of money. Among those from whom we learned that are
Maalik, al-Awzaa’i, al-Shaafa’i, Abu Thawr and Ashaab al-ra’y… That is not
valid for two reasons. The first is that if a specific amount of money is
stipulated, it is possible that they may not make any other profit, so that
person will take all of the profit. And it is possible that they may not
make a profit at all, so it would be taken from the capital. Or they may
make a great deal of profit, and the one for whom a specific amount of money
was stipulated will lose out. The second reason is that the share of the
agent should be a known percentage, because it is not permissible for it to
be a set amount of money. If the percentages are unknown, it is invalid. End
Shaykh al-Islam Ibn Taymiyah said:
If it stipulates in the mudaarabah contract that the owner of
the money will get a certain amount of money, this is not permissible,
according to scholarly consensus. That is because transactions should be
based on fairness, and these transactions are a kind of partnership, and it
can only be a partnership if each partner gets a percentage, such as
one-third or one-half. If one of them is given a specific amount, that is
not fair, rather it is unjust. End quote from Majmoo’ al-Fataawa,
The Standing Committee was asked about two men, one of whom
gave the other a sum of money with which to do business for him, and they
agreed that he would give him 3% of the capital as a profit each month.
Your giving the money to the trader to do business with it
and his giving you a set amount, three percent of the money, is not
permissible, because it is a kind of guaranteed profit. End quote from
Fataawa al-Lajnah al-Daa’imah, 14/318
They were also asked
about a company that takes money from people to do business with it, and
gives them a share of 30 percent of the capital every year, and claims that
it makes a profit of 100 percent.
If the company mentioned gives the partners a set, guaranteed
amount of profit, this transaction is not permissible, because it is riba.
The transaction which is permissible is that in which each partner is given
a share such as one-quarter or one-tenth, which increases or decreases
according to what happens. End quote from Fataawa al-Lajnah al-Daa’imah,
And Allaah knows best.